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May 9, 2012

Greece, France Jockey for Change

Ireland sees opportunity to lessen austerity burden

Greeks protested unpopular austerity measures. (Photo: AP)

Alexis Tsipras of the far-left Syriza party in Greece has given leaders of other parties an ultimatum: reject the bailout and its tough conditions, or be shut out of the government. In France, the party of outgoing President Nicolas Sarkozy is trying to hold together before parliamentary elections, lest it shatter and hand a complete victory to the Socialists. And in Ireland, those opposed to grinding austerity measures see opportunity to renegotiate for an easier time.

Bloomberg reported Wednesday that Tsipras told the leaders of the two major parties—Antonis Samaras of the conservative New Democracy party and Evangelos Venizelos, the former finance minister and head of the socialist Pasok party—that if they want to be included in a government alliance, they must revoke written pledges to put austerity measures in place. Further, they were to do so in a letter to the European Union, and it was to be done before a planned meeting at 5 p.m.

Both Samaras and Venizelos refused, with Samaras saying in the report that he was being asked “to put my signature to the destruction of Greece.”

“He interprets, with unbelievable arrogance, the election result as a mandate to drag the country into chaos,” Samaras was quoted saying. “I hope Mr. Tsipras will have come to his senses by the time we meet.”

Samaras, whose party won the most seats in Parliament, has already failed to put together a coalition to govern Greece. Should the second-place Syriza party fail as well, the chance to form a coalition will pass to Venizelos, who, according to an anonymously sourced Greek news report cited by Bloomberg, has already said he would reject a mandate to do so.

The task would then pass to Greece’s president. Should that fail, new elections would be held. In the meantime, uncertainty over the outcome could send Greece into a financial tailspin—right out of the euro zone.

A mid-May visit by the so-called troika, the group made up of E.U., International Monetary Fund (IMF) and European Central Bank (ECB) officials in charge of overseeing the bailout, was canceled, according to a German newspaper report. Amadeu Altafaj, European Commission (EC) spokesman, recast that, saying in a statement, “The mission has not been ‘canceled,’ as there has never been a fixed date for the mission. As soon as there is a government, there will be a mission.”

Meanwhile, in France, Sarkozy’s Union for a Popular Movement (UMP) party was struggling to hold off on internal disputes that threaten its very survival. If UMP fails to keep a lid on inner controversies for another six weeks, it will likely—as, indeed, polls already predict—lose any chance at preventing Francois Hollande’s Socialist party from taking control in Parliament.

UMP members are sharply divided over whether to make deals with Marine Le Pen’s anti-immigration, anti-euro National Front party, which was founded by Le Pen’s father, a Holocaust denier. Sarkozy’s pre-election ideological turn to the right was seen by many as one reason he came out the loser in the presidential election, although Le Pen’s party captured a substantial portion of the vote.

A Socialist-majority Parliament would make Hollande’s program more likely to be enacted. It includes higher taxes, provisions for a 75% tax on incomes above 1 million euros ($1.3 million), returning the retirement age to 60 from 62 and higher spending.

In Ireland, in advance of a referendum to be held on Europe’s fiscal treaty on May 31, the opposition sees a ray of hope in the election outcomes that punished austerity measures and turned instead toward growth.

Eoin Fahy, an economist at Kleinwort Benson Investors in Dublin, was quoted saying that the results in Greek and French elections “allow the treaty’s opponents to argue the tide is going out on austerity.” He added, “The results are damaging for the ‘yes’ camp. Just how damaging remains to be seen.”

Mary Lou McDonald, deputy leader of Sinn Fein, the largest party opposing the treaty, was quoted saying Monday, “The people of France, the people of Greece are against the policies of austerity and it is now a moment for Ireland to add our voice to that. The best way we can do that is by delivering a resounding ‘no’ vote.”

Hollande has said that he wants to amend the fiscal treaty to add growth measures and to oppose European policy based solely on austerity measures. He has also said he wants to renegotiate the E.U.’s fiscal accord to provide for issuance of joint euro bonds and to fund growth and industry measures.

Ireland’s people see his election, and the Greek voter rejection of austerity, as a window of opportunity to win concessions to lessen their own burden; however, the Irish government will find it awkward should Hollande persevere in changing a treaty it has pushed its citizens to accept in the upcoming referendum.

Paul Murphy, a Socialist member of the European Parliament who is campaigning against the treaty, said in the report, “We have a unique opportunity to deal another strong blow to the austerity agenda that works only for the bondholders and rich. We can add to the momentum against this treaty and potentially sink it.”